Written by Tiffany Woodfield, Associate Portfolio Manager, CIM®, CRPC®
For Americans moving to Canada, there are so many things to take care of and consider that financial planning can end up last on the list. But aside from the visa considerations, selling your home, and worrying about getting a new place in Canada, you also need to think about your investments and tax planning.
Nobody wants a hefty tax hit the first year they’re living in a new country, and to prevent that from happening, you need to avoid the most common cross-border pitfalls.
As a cross-border financial advisor, I am constantly speaking with Americans and Greencard holders who are planning a move back to Canada. So over the years, I’ve noticed that the same mistakes come up over and over again.
If you just want a simple guide to walk you through your move, CLICK HERE for our Cross-Border Moving Checklist. Or read through this article to get some of our best tips on navigating your move from the US to Canada without making so many common mistakes.
Let’s make your move as simple as possible!
TABLE OF CONTENTS
- Pros and Cons of Moving to Canada
- Gather Important Financial Documents Before You Move
- Get Private Health Insurance Before You Land in Canada
- Rent or Sublet an Apartment in Canada Before You Buy
- Tips on Buying Property in Canada
- Housing and Real Estate Costs in Canada
- Cost of Living in Canada vs. US
- Most Expensive Places to Live in Canada
- Hidden Gems to Explore When Choosing Where to Live in Canada
- Financial Implications of Moving from the US to Canada
- Retired Americans Moving to Canada
- Common Questions Americans Moving to Canada Ask
- How to Get Your Finances in Order Before You Move to Canada
- Putting Together Your Cross-Border Team
- Choosing the Right Cross-Border Financial Advisor
- Summary of Key Points
- Next Steps
- SWAN Wealth
Pros and Cons of Moving to Canada
The pros of moving that many of my clients have mentioned when moving to Canada are as follows:
- It is less politically charged, which means someone may or may not share your views, but their opinion is not in your face. There tends to be a more relaxed atmosphere up here in general.
- It is a great place to retire because you don’t have this fear of an unexpected significant healthcare bill because Canada has a publicly funded healthcare system.
- If you have school-age children, you may feel it is a safer place to raise them.
- The general feedback is there is easy access to the outdoors.
The cons of moving to Canada are that the taxes are higher, home prices are usually higher, and there aren’t as many job opportunities. Another con is that you may find it challenging to get a family doctor if you live in a metropolitan area. Some people may choose to work with a private functional medicine doctor or use other private alternatives.
Gather Important Financial Documents Before You Move
Before you move, you will want to get your financial house in order so you can plan your lifestyle in Canada. In particular, it is much more challenging to get answers about your US pensions when you are living across the border, so check this list and take care of all items before you move.
What to do before you move:
- Sign up for an online social security account to access your pension information and know the amounts.
- Get all the pension documents from your past or current employer.
- Determine what you are invested in as a US resident. Some investments may not be eligible to be brought to Canada.
- If you worked in Canada before you moved and haven’t yet registered for a My CRA account to determine what you are entitled to Canadian CPP and OAS you can also take care of this now.
- If you have insurance and annuities, these work differently in Canada versus the US, so gather these documents. Also, do not purchase new policies before you move or at least consult with a cross-border professional before you consider purchasing.
- If you have a revocable living trust, you will likely want to close this before moving across the border, as they are taxed differently in Canada than in the US and can complicate your situation. But you should speak with your cross-border financial advisor and cross-border accountant about this.
- You might want to sell your home in the US before you move. Selling your US home as a Canadian resident is likely more complicated than if you sell while you are still living in the US.
- Make sure you have your immigration documents.
- Make a tracking list of your assets. This tracking list will include rental properties, your principal residence, investments, wills and previous financial plans.
- Put other important documents all in one place. Include things such as your social security documents, medicare information, and driving history.
- Do you want to be able to walk to the grocery store or restaurant?
- How much time will you dedicate to yard work?
- Will your priority be to travel more?
- How secure is the property if you were to go away for several months?
Get Private Health Insurance Before You Land in Canada
The universal publicly funded healthcare in Canada usually takes up to three months to come into effect for returning Canadian Citizens and Permanent Residents after establishing residency. It is best to get private health insurance to help with emergency medical treatment while waiting for your provincial coverage.
Rent or Sublet an Apartment in Canada Before You Buy
The housing market in many Canadian cities has been booming, causing bidding wars and making it difficult to purchase when you aren’t living close. Although there may be a softening in the market as interest rates are expected to increase, the popular areas still have a higher demand versus supply.
If you are moving to Canada, you are already reaching the point of decision fatigue with the move. Many of our clients have decided to rent an apartment while checking out homes to make it easier and relieve pressure. It helps them make intelligent decisions rather than panic and buy something that isn’t right for them.
Tips on Buying Property in Canada
When buying a property in Canada, the age-old saying of “location, location, location” still rings true. Although nobody likes renovations, if you are looking at making a wise financial decision, choose the best location first. Also, take into consideration your current lifestyle.
If you are still working, you may have the option of working remotely and won’t need to go to the office daily, so proximity to the office isn’t as crucial. However, if you have school-aged children, the location of childcare and schools is a significant consideration.
Next, if you’re retiring from the US to Canada, you need to consider what is most important to you. Ask yourself these questions:
Don’t forget that when your principal residence goes up in value, this capital gain isn’t taxed by the CRA in Canada. So it makes sense to spend on a house that you love.
*For a US person reporting back to the IRS, the rules still apply that the first $250,000 US of capital gain per person may not be taxable. If you married a US couple, you may have a $500,000 exemption. Speak to a cross-border accountant about this.
Housing and Real Estate Costs in Canada
When buying property in Canada, people are often shocked at the price tag. Some of our clients remember living in Canada when prices were reasonable. But today, prices are high in the most desirable markets. So you should expect to pay more for a home when you move to Canada.
Cost of Living in Canada vs. US
Feedback from my clients is that the cost of living is higher in Canada versus the US, not considering the exchange rate in Canadian dollars.
In Canada, housing and taxes are often the most significant expenses. However, our client's feedback is even things like, getting a haircut, buying clothing and eating out have been close to double the cost, although this isn’t considering that you have greater purchasing power with a US dollar.
However, it wouldn’t be fair to leave out how much cheaper healthcare and going to university is in Canada. If you’re coming here for a relaxed lifestyle or a job, then the cost of living may not be a concern. Many Canadians offset their cost of living by doing low-cost activities in the beautiful outdoors.
Most Expensive Places to Live in Canada
If you want to live in Toronto, you may be surprised by how expensive it is to buy a home there. There isn’t much on the market, and many people want to live in this vibrant city. The second most expensive place to live in Canada is Vancouver. While it may not have as much entertainment as Toronto, it still has plenty of culture and things to do. And what it lacks in entertainment, it more than makes up for this with its natural beauty. Vancouver is surrounded by the vast North Shore Mountains and is situated on the Pacific Ocean. It offers a mild year-round climate and the ability to hike, ski, bike, golf, and enjoy beautiful beaches.
READ MORE: Everything You Need to Know About Retiring in Vancouver
Hidden Gems to Explore When Choosing Where to Live in Canada
Some of the other hidden gems our clients have come to love are the following three places:
- The Okanagan
The scenery is fantastic. There are lakes to go paddleboarding, mountains to hike or ski and golf courses to challenge you. It is also home to more than 200 wineries. The Okanagan has been referred to as the “California of Canada” for a reason! - Vancouver Island
The island has a more relaxed lifestyle than Vancouver, while still boasting the mild season-round weather. Also, the housing prices are less than in the bustling city of Vancouver. You will still be surrounded by beautiful nature, such as mountains, lakes, and the ocean. - Halifax
Nova Scotia offers beautiful scenery and ocean breezes with a lower cost of housing than Toronto or Vancouver. It is also known for its friendly people and community feel.
Financial Implications of Moving from the US to Canada
1. You will have two countries that have the right to tax your worldwide income once you become a Canadian permanent resident.
If you are considered a US person and a Canadian tax resident, you must know the rules and pitfalls to avoid double taxation and additional costs.
2. You will likely need to find a new investment advisory firm with the ability and expertise to work with cross-border clients.
Often my clients didn’t realize this until after moving. They panicked when they received a letter from their old brokerage firm stating they could not advise them as non-US residents.
3. It gets complicated with Non-Registered Investment Accounts if you do not plan properly.
When you become a Canadian tax resident, these taxable accounts likely will need to be reported in two countries, with two different currencies and cost basis. The solution is to speak to a cross-border team ahead of your move so they can manage this behind the scenes to save you headaches and money.
4. You will need to work with a cross-border accountant.
You need to work with a cross-border accountant because you will need someone who understands how taxation works as a Canadian resident and a US person. After all, you will be filing to the CRA (Canada Revenue Agency) and the IRS (Internal Revenue Service). When you work with an expert, they understand how all the foreign tax credits work and can help you avoid falling into double taxation.
5. If you are a long-term Green Card holder or US citizen and considering giving up your US status, you need to know if you are a Covered Expatriate.
There are three tests to determine if you are a covered expatriate, and you will want to speak to a cross-border tax lawyer before you give up your Green Card or US citizenship. This is because if you are a covered expatriate, it may mean you are spending a significant amount to give up your US status.
6. Taxes are generally higher in Canada, and you need to plan your taxable events.
Higher taxation in Canada means you will want to plan and have major taxable events while still living in the US and only reporting taxes to the US. Taxable events might include shares that will be vesting, company bonuses, and selling your home*.
*speak to a cross-border accountant regarding your particular situation
7. The cost of a home in Canada is generally higher.
Higher housing costs mean that you will want to plan where you want to live, so you aren’t surprised.
Retired Americans Moving to Canada
When our American retiree clients move to Canada, they typically feel a sense of peace and relief. The ongoing worry about the political situation in the US is less, and they can relax and put their guard down. Many clients have moved back to where they grew up to be closer to family. Often, it isn’t until they are in Canada that they realize the stress they had been under before the move.
When you move back to Canada as a retiree, the benefits of Canada may be even more significant because you have income and investments in US currency, which is usually higher than Canadian currency. You have more control over your income levels and are less affected by the higher tax rates. In addition, the reduced fear around how much future medical bills may cost makes living in the present moment and doing what you love more enjoyable.
While the US offers greater career opportunities than Canada, and the average cost of living in the US is less expensive, health care is one of the highest outstanding future costs. Saving on health care while living somewhere you love is one good reason to move to Canada.
READ MORE: How Much Do You Need to Retire in Canada?
Common Questions Americans Moving to Canada Ask
Can a US citizen move to Canada without citizenship?
A US citizen can move to Canada without citizenship, but they will need to become a Permanent Resident first. Once you have held the permanent resident status for five years, you are eligible to apply for citizenship.*
*For your specific situation, speak to an immigration lawyer first.
Should I move to Canada from the US for healthcare?
“Should I move to Canada from the US for healthcare?” is a question I often get. It is a very personal decision. Although we have universal publicly-funded healthcare in Canada, the level of service and time it takes to get procedures can be a lot longer than in the US.
Many of my clients say in the US, the difficulty is that if a hospital tells them that they need surgery, they wonder if they should get a second opinion. The doctor benefits if you do the procedure, so it can be confusing to navigate what is the best thing to do.
While in Canada, if the doctor recommends a procedure, you know they do not have a financial incentive for you to do it. However, the wait times for non-emergency procedures are long, and some people I know have chosen to go to Alberta and pay for non-emergency procedures to get them done quickly.
Moreover, finding a family physician who takes new patients is challenging in the big cities. So, in short, in Canada, healthcare is less expensive; however, it isn’t a privately run business, so the priority is to help those with the most pressing needs.
What are the benefits of living in Canada?
My American clients' feedback on the benefits of living in Canada is that it is more politically correct and feels much more accepting of everyone. It also feels safer and more laid back than in many areas of the US.
Is it cheaper to live in Canada or the US?
It is generally more expensive to live in Canada than in the US. It is costly in your high-income earning years because you don’t benefit from filing jointly for your taxes, and you are pushed into the highest tax bracket more easily. In addition, housing and food tend to be more expensive than in the US. However, for retirement, when you have accumulated wealth in US currency and are living in Canada, you may be further ahead and not find the costs to be an issue.
What are the negatives of living in Canada?
The negatives of living in Canada are the higher taxes and the cost of housing. While we have a smaller population and a lot of nature, it can be surprising how much you pay for your home when you move across the border.
How hard is it for an American to move to Canada?
There have been more and more Americans moving across the border. Since Covid, many companies have become adaptable to allow employees to live where they want. Even if the company is in the US, they allow more and more employees to go back to Canada. They are looking at ways to either have contract workers and Canadian payroll or if they have a Canadian subsidiary. Often the clients we work with will move to Canada on a family sponsorship with their spouse, with a start-up visa, or a work visa if they get a permanent job that is in demand by the Canadian government.
How to Get Your Finances in Order Before You Move to Canada
First, I would recommend consulting with a cross-border advisory team who can manage your investments, provide a pre-move tax consultation, and have a network of experts to guide you in making intelligent decisions.
The transition year is the most stressful, and you want to get your finances in order before you move. It is crucial to create a list of all your pensions, investments in registered and non-registered accounts, bank accounts, properties and anything held in a trust. Additionally, you may want to stop any direct debit payments and discuss with your bank if they can help you once you are living in Canada.
Once you become a permanent resident in Canada, you will need to report your worldwide income to the Canadian government. Before this happens, you will want to have everything in order.
Next, keep in mind that your credit rating usually doesn’t transfer to Canada, so you may not have the same level of the credit limit on your credit card. I have often found clients are surprised with this as they are making larger purchases, and their limits are very low. You should apply for a credit card in Canada right away to build that credit history.
Next, ask yourself how your estate will be affected by your move. For example, a common mistake is moving to Canada and keeping your assets in a revocable living trust, but these are not treated the same way in Canada as in the US. Whether you can hold the same investments when you move across the border is also a question you need to consider.
Putting Together Your Cross-Border Team
I often tell clients they need a quarterback to coordinate their cross-border financial picture. They need someone who can provide an overview of their situation, know when to bring in other specialists, and has a network they can refer to. I have often found that the most significant mistakes have happened when clients have a disjointed team and get advice in only one area of their finances.
When things go wrong with your cross-border finances, it takes so much more time and therefore costs much more to get the proper guidance and fix the situation.
As a cross-border advisor, we have a cross-border accountant on our team at Raymond James and work with a network of cross-border lawyers and other cross-border accountants. We can refer you to the right people, so you have a team working for you. It is essential to have a cohesive team that works together so you can feel confident all the various parts are being taken care of for you.
Choosing the Right Cross-Border Financial Advisor
Here are a series of questions to ask yourself as a guide to choosing the right cross-border financial advisor:
First, consider the logical details:
- Do they have the expertise to help me in my situation?
- How familiar are they with working with clients like me?
- Do they have the ability to quarterback my cross-border finances?
- Do they have a fiduciary responsibility?
- Can they manage and provide advice on the investments and create a cross-border financial plan?
- Do they have someone on their team who can offer advice on taxation in both the US and Canada?
- Can they prepare tax returns for both countries if necessary?
- Can they help me whether I live in Canada or the US?
- If I move back, can I still work with them?
Next, determine the emotional details by asking yourself:
- Do you feel you could discuss your fears, beliefs and goals around money?
- What are this company's values?
- Do you feel aligned with this company’s values?
Once you have evaluated both the emotional and logical sides, you will feel confident that you have chosen the right team. The right team can help you avoid the common traps and pitfalls and guide you to reach the correct destination of where you want to live to feel confident it is taken care of, and you can enjoy your next adventure!
Summary of Key Points:
- You will want to get your financial house in order before you move. Put together all the paperwork and follow a checklist to ensure you don’t miss anything.
- Do your research and find an excellent team to be your guide. Don’t wait until you’ve moved to take this step. Doing this early will save you time and money and prevent major financial headaches.
- The cost of living may be more expensive in Canada, but you need to be comfortable and happy where you live. So choose based on where you want to live, then work out a financial plan that can make your dream lifestyle happen.
- Having a quarterback when putting together your cross-border financial team is essential.
Next Steps
Please get in touch if you’re an American or Greencard holder moving to Canada and need assistance with moving your investments, estate planning, and portfolio management. At SWAN Wealth, we specialize in Canadian financial planning, cross-border financial planning and cross-border wealth management. We help Americans and Canadians move towards a work-optional lifestyle by managing their investments wisely. Whether you’re currently retired or at the top of your career, we can help you protect your assets and legacy.
AT SWAN WEALTH MANAGEMENT, WE HELP IN THE FOLLOWING WAYS:
- Manage your IRA and retirement accounts from Canada or the US
- Offer a pre-immigration consultation from a tax perspective before you move
- Guidance on retirement benefits such as CPP, social security and medicare
- Transfer your investments from the USA to Canada, keeping them in a tax-deferred account
- Hold investments in US and Canadian currency on both sides of the border
- Minimize your tax burden by creating a tailored financial plan
- Manage your investments over the long term so that you can retire happily
- Provide access and management to your investments no matter what side of the border you live
- Understand the tax implications of various investment strategies
- Create a financial plan that serves you in the short and long-term
- Act following our fiduciary duties to ensure every aspect of your financial plan is in your best interest
- Help you with your cross-border estate planning so you can leave the legacy that matters to you
- Refer you to one of our in-house cross-border accountants so you can have everything done under one roof.
More Canadian Financial Planning Articles & Guides
If you’re planning a cross-border move, these articles and guides will help you simplify your move and ensure you’ve got everything covered.
The Ultimate Financial Planning Resource for Dual Citizens or Green Card Holders Living in Canada
Cross-Border Estate Planning Guide
401k in Canada - How to Stay Onside with the IRS and Avoid a Large Tax Bill
Roth IRA Canada: How to Manage Your Investments Across the Border
Retiring to Canada - A Financial Planning Guide
Financial and Tax Planning for US Citizens Living in Canada
Canadian RRSP Facts for Dual Citizens, Expats and Canadians
About the Author
Tiffany Woodfield is an Associate Portfolio Manager licensed in Canada and the USA and the co-founder of SWAN Wealth Management with her husband, John Woodfield. Tiffany specializes in advising clients who live in Canada and the United States and want to minimize their tax burden and have their cross-border finances managed correctly. Tiffany and John Woodfield help their clients simplify their cross-border finances and create long-term revenue streams to keep their assets safe whether they live in Canada or the US.
